Suspension of activity and the right to deduct VAT

Service-Tax

One of the things a business owner who has no employees has the right to do is to suspend business. The period of suspension provided for by the regulations may last from 30 days to 24 months. If the entrepreneur does not resume activity within 24 months, the entry will be deleted ex officio. In order for the suspension of activity to have legal force, you must complete the CEIDG-1 form and submit it to the commune or city office. It can be done:

  • in person at the city or commune office,
  • electronically using a secure qualified signature,
  • electronically without a secure qualified signature - through a trusted profile (here you need to go to the appropriate facility and sign the form personally),
  • by registered mail with a signature certified by a notary.

Suspension of activities

In art. 14a (4) of the Freedom of Economic Activity Act, you can find the rights and obligations of an entrepreneur who suspends his business. Among them are:

  • the right to perform any activities necessary to maintain or secure the source of income;
  • the right to accept receivables and the obligation to settle liabilities that arose before the date of suspension of operations;
  • the right to dispose of own fixed assets and equipment;
  • the right or obligation to participate in court, tax and administrative proceedings related to business activities performed before the suspension;
  • the need to perform any duties prescribed by law;
  • the right to obtain financial revenues, also from activities carried out before the suspension of economic activity;
  • the possibility of undergoing inspection on the terms provided for entrepreneurs conducting business activity.

Suspension of business activity

Among the above-mentioned obligations is the obligation to settle obligations that arose before the date of suspension of operations. Usually these are after the date of suspension of payment for the ordered goods or materials. It can also be, for example, a rent, a leasing installment or an internet and telephone fee.

It should be remembered that, in accordance with the Personal Income Tax Act, an expense may be allocated to tax deductible costs only if it is related to business activity and it was incurred in order to obtain or preserve income or to secure its source. The exception is the costs referred to in Article 23 of the said legal act. The entrepreneur's intention to resume economic activity after the suspension period, in which these costs will be related to the performance of taxable activities, is of significant importance here.

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Suspension of activity - deduction of VAT on expenses

A business owner who is an active VAT payer has the right to deduct tax from expenses incurred during the suspension of operations. The key is to meet the condition set out in Art. 86 sec. 1 of the Act on tax on goods and services. It says that a taxpayer can deduct input VAT on purchased goods / services if he purchased them for business purposes.

The taxpayer has the right to deduct the tax in the period in which the tax obligation arose with the supplier, but not earlier than in the period in which he received the invoice, or in one of the two following. If the entrepreneur wants to exercise this right, he will be obliged to submit VAT returns within the statutory deadlines. Such a taxpayer also has the right to return the excess tax to a bank account, with the refund period being 180 days from the date of submitting the declaration. This period may be shortened to 60 days in a situation where the entrepreneur sells his own fixed assets or equipment.

In addition to the solution indicated above, there is another option: the taxpayer can deduct the input VAT when the suspension of activity is over (the activity will be suspended). It will then do so by submitting a revised VAT return covering the entire period of suspension of business activity.